BlackBerry shares today are down 66 cents, or 7%, at $8.80, after a 1.7% rise on Friday.

During an appearance on CNBC on Friday, CEO John Chen defended the company’s progress with its “BES 12” software for enterprises, part of what Chen expects will be $600 million in software revenue.

“BES 12 is one of the highlights, it is the only reason why we would grow software sales 24% sequentially.” He said the company has 30,000 customers using some version of BES and many are moving to BES 12.

Regarding newer devices, such as the “Passport,” and the “Classic,” Chen said it was “too early” to render judgment about their ultimate success, while noting there are “lots of carriers” and 6,000 stores in 68 countries carrying the devices.

“We have now shown financially we are well under control; now I need to stabilize revenue, and then I’m going to start growing that; we are kind-of in the second half of the ball game in terms of the turnaround.”

One of the most positive responses from the Street today is from Mark Sue of RBC Capital Markets, who maintains a Sector Perform on the stock, and an $11 price target, and notes the positives on software, and BES in particular, coming out of the report:

BlackBerry’s making investments incarrier reselling/distribution for software modules, which may boost revenues in the back-half as carrier and resellers ramp. Qualification for 300 resellers for BES and VAS is in the works. 10 resellers have signed up to resell SIM-based licensing software. There’s multiple tier-1 carriers/OEMs reselling software, including DT, Sprint, Samsung etc.; albeit, investorsshould note most reseller agreements tend to not be exclusive.

He also sees progress for the newer hardware offerings:

There’s some traction for hardware and Passport/Classic may be receiving decent reception. Despite the launch timing, >90% of hardware units sold were new devices. ASPs improved to $211 vs. $180 in F3Q and are expected to trend higher, which coupled with COGS reductions, may increase hardware margins in F2H16.

Sue is something of an outlier: Most of the notes this morning express a fairly strong degree of skepticism, especially toward the software goal, though most seem willing to believe the company’s drive toward full-year profit this year will, indeed, work.

Canaccord Genuity‘s Mike Walkley reiterates a Hold rating on the stock, and a $10 price target, writing that he believes in the company’s profit goals, but that software sales are an uphill slog:

We believe the lowered cost structure should enable BlackBerry to meet its target of remaining free cash flow positive during F2016. Despite our lowered F2016 hardware sales estimate, we believe BlackBerry could achieve non-GAAP positive EPS in 2H/F2016. However, we believe growing software sales will only partially offset the continued steep decline in the higher-margin services revenue, resulting in modest non-GAAP EPS during F2016/F2017. In fact, we believe BlackBerry faces the challenging task of selling not just EMM subscriptions but must also upsell substantial amounts of VAS to potential new subscribers in a highly competitive enterprise mobility market to offset declining services revenue and drive long-term meaningful profitability.

MKM Partners‘s Michael Genovese reiterates aNeutral rating on the shares, and a $10 price target, wrting that the goal for software sales are too high:

John Chen said he would not yet give up on the $600mn Software target for FY16 even though Software revenues came in at only $67mn in 4QFY15, including only ~$13mn in EZPass conversions. He also acknowledged that BBM monetization is running behind plan. We view the Software guidance as overly ambitious given the EMM competitive landscape. Moreover, Services revenues are expected to continue to decline ~15% per quarter throughout 2016 which will more than fully offset any growth in Software.

Credit Suisse‘s Kulbinder Garcha reiterates an Underperform rating, and a $6 price target, writing that services are a challenge for the company:

Services: Services continued to see an accelerated decline, falling about 15% q/q. We continue to see headaches for the services business, as we believe that (1) subscriber base will continue to erode, (2) ARPU will fall due to the shift toward BB10, (3) the monetization of EZ Pass remains difficult in a competitive MDM market environment. Furthermore, management highlighted that they expect the decline in SAF revenue (-15% q/q) to continue, which they expect to offset by doubling software revenue by the end of FY16 to $600mn. We remain skeptical that they can achieve this type of growth in software to offset the decline in their services business. Additionally, we are also concerned that GM’s in the services segments may start to come down as revenue pressures persist. We assume FY16/17 services revenues are $846/$467mn.

Stuart Jeffrey with Nomura Equity Research reiterates a Neutral rating, and a $9.70 price target, writing that the software goal seems “optimistic”:

Management does not expect to see a material software revenue boost from BES12 license adoptions until fiscal H2, making it hard to judge momentum based on Q4 or Q1 numbers. While we forecast good growth, our $456mn software revenue forecast remains below management’s $500mn guidance for FY16. Our caution is based on our checks that suggest a potentially meaningful number of EZ Pass licenses are being taken up as an insurance option with no intention to use them or upgrade to Gold licenses.

He thinks newer handsets such as the Passport and Classic and “Leap” play only to the faithful: “Reviews of new devices suggest that they are unlikely to appeal much outside of the BlackBerry heartland.”

“Unless device sales pick up quickly in Q1, concerns over the contribution of device revenue in driving group revenue could build.”

UBS‘s Amitabh Passi reiterates a Neutral rating, and a $10 price target, writing that there seems limited interest in the software and services:

However, these sales are still a fair distance away from the average of $150m/quarter required in FY16 to hit BBRY’s goal of $600m for FY16. As we highlighted in our F4Q preview (link), under a set of assumptions predicated on healthy activation of EZPass licenses and reasonable uptake of enterprise productivity and security value-added (VAS) suites, BBRY could get close to its $600m goal. However, based on current visibility and our own surveys, interest in BES12 and BBRY VAS offerings remains low, and we remain doubtful BBRY will hit its target. In the meantime, cost cuts and cash flow have stabilized business.

Citigroup‘s Ehud Gelblum reiterates a Sell rating, and an $8 price target, writing that there’s little reason to be optimistic about software:

Software trends are also not exactly exuding optimism on rev of $67M, up 24% q/q and 20% y/y as it including 2 acquisitions (Secusmart / Movirtu). FY15 SW revenue of $231M fell short of mgmt’s prior $250M guidance and implies hitting guidance of $500M of Software revs in F’16 comes off a lower base. Mgmt was “not willing to give up on the number just yet.” E-Z Pass users stalled in Dec at 6.8M and current subs were not disclosed. Yet software “bookings” of $13M were also low using either 1-year or 1 and 2 year contract lengths implies BBRY likely converted just 1-1.6M of its 6.8M E-Z Pass subs into revenue paying customers.

In fact, it’s hard to believe software will offset the services decline, he writes:

All indications continue to point to deteriorating fundamentals despite mgmt’s mantra that they have stopped the bleeding with 2 op profitable qtrs. We fail to see where the floor for revenue is while EPS was boosted by low opex, tax credits, and Fx. We cont. to not be able to see how the EMM/MDM and software revs grow fast enough to offset the accelerating 60-70% y/y declines in Services revs that lie ahead in both FY16 and even more acutely in FY17.

Hutchinson notes that “mature” vendors did better as far as stock performance last year, and offers that “We believe that investors should revisit growth companies, around which sentiment has been negative – In our view, investors should seek out secular share gainers with superior market positioning.”

Among the large trends he sees, software is taking over from hardware as cloud computing and software-defined networking (SDN) take over from hardware as the focus, and there is another wave of M&A that is commencing:

New technologies, architectures, and delivery models are disrupting traditional business models as enterprise seek ways to reduce IT capex and opex. These include cloud computing, software-defined architectures, network function virtualization, white box hardware, and open-source software – Historical partnerships between legacy IT vendors are losing relevance – Software will continue to eat away at hardware. “Cloud titans” (e.g., Facebook, Google, and Microsoft) have led the charge, but the broader enterprise is close behind • We expect continued consolidation, restructuring, and reorganization of the IT landscape, with activists leading the charge. Our coverage list is a tale of two cities: high growth secular share gainers versus slow growth technology value plays. We are neutral on the data networking and communications space and believe that investors should pick their spots carefully, but there are hidden gems to be found; we recommend secular share gainers.

Regarding the “next wave of consolidation,” Hutchinson writes,

M&A in this group was active in 2009–2010 with Data Domain, Compellent, Isilon, and others acquired – In our view, Thomas Bravo’s acquisition of Riverbed and HP’s purchase of Aruba Networks kick-started the beginning of the next cycle of M&A.

Reviewing his top three picks, Hutchinson writes,

Infoblox, price target $30: Product revenue acceleration driven by new management team, rebuilt DDI pipeline, and growing security attach rates; we believe BLOX is successfully executing on its transformation from a “nice to have” to a line item in IT budgets; we believe the company can generate growth at or above 20%;

Ruckus, price target $15: #2 U.S. service provider Wi-Fi vendor after Cisco; #3 enterprise WLAN player after Cisco and HP following Aruba buyout; we believe RKUS is well positioned for organic growth and total addressable market (TAM) expansion with new product additions; becoming an increasingly attractive takeover target; RKUS is our favorite name in wireless.

Today, shares of Infoblox are up 13 cents, or half a percent, at $23.95; Ruckus is up 16 cents, or 1.3%, at $12.33; and F5 is up $1.36, or 1.2%, at $113.59.

Facebook (FB) shares today rose 9 cents to close at $83.01 as the Street contemplated the various enhancements and partnerships for its “Messenger” program announced yesterday by CEO Mark Zuckerberg at the company’s “F8″ developer conference in San Francisco yesterday.

Other announcements followed today, such as discussion of the forthcoming consumer release of the Oculus Rift virtual reality gear; something called “FbStart,” a program to sign up developers and offer them tools such as “Parse,” an Internet-of-things development library; and something called “Share Sheet,” to allow users to link content across various parts of the Facebook empire, including Instagram and WhatsApp.

SunTrust Robinson Humphrey’s Rob Peck reiterates a Buy rating, writing that Messenger and such apps are “the new portal” for the Web, and that coupled with things like a payments service, it can mean a lot of additional revenue for Facebook:

Internet 1.0 was popularized by portals like Yahoo! and AOL. The traditional portal was where everyone started their day. On PC, Facebook eventually morphed into a portal-like service. On mobile however, it is different – Messaging is becoming the next generation of portals. Consumers start their day checking messages, they are also consuming more and more general news, pictures, and videos. Moving across the verticals, one of the next logical steps is eCommerce and payments, which Messenger Platform would enable. Further, Facebook would not only help create deeper relationships for brands, but have access to direct sales information, “closing the loop” in advertising allowing Facebook to demonstrate direct ROI from various types of ads. Lastly, enabling app discovery through Messenger could also present further monetization opportunities. We estimate that the eCommerce and Payment opportunity alone could present a >$2B opportunity.

Peck likes the IoT implications of Parse:

With over 400K developers and 1.4B users, we believe the Parse technology that helps connect these devices has the potential to make Facebook the “OS” for them, as they track and communicate information to consumers via Facebook.

It’ll be a little bit before the Oculus device contributes meaningfully to the company’s financials, but it won’t hurt to have the “hype” in the meantime:

We believe VR is the next distributive platform in computing. At F8, Oculus talked about a new level of social interaction (you can be anywhere with anyone, virtually) as a core utility of VR.We expect the price will be between $200-$400, plus a high performance graphics computer, which will be around $1,000 (all-in cost of $1,200-$1,400). Along with this consumer hardware launch, we expect compelling content to ramp early in 2016, which should set the stage for a favorable earlier adopter Oculus buy-in. We expect mainstream adoption in 5-plus years as the all-in cost approaches $200-$400. Oculus Rift is a significant long term (5+ years) opportunity for Facebook, but we believe that before Oculus impacts Facebook’s financials investor hype around the opportunity could move shares of FB higher.

Stifel Nicolaus’s Scott Devitt reiterates a Buy rating today, and a $97 price target, writing that Facebook has become a family of businesses:

Facebook’s evolution from a single core app into a family of unbundled apps that each attract hundreds of millions of users each month marks the company’s biggest shift in strategy in many years. Facebook’s core application is used by 1.4B people every month, but Groups (700mm), WhatsApp (700mm), Messenger (600mm), and Instagram (300mm) each carry impressive reach in their own right.

Devitt is especially intrigued by the Facebook’s intention to spread use of Messenger, and of third-party applications built on top of it, to the business community:

Facebook’s biggest announcement was that Messenger would be opened up as a platform for 3rd parties. Developers can now build richer tools for expression in Messenger than Facebook could have built itself, which can provide enhanced discovery, distribution, and attribution for their apps. More than 40 such apps for Messenger built by notable 3rd parties (including ESPN) are expected to launch in the coming days. Messenger for businesses could potentially become an even more compelling enhancement to the product, as Facebook will provide a streamlined way for users to communicate with businesses and track receipts / shipping info after their purchases.

Shares of Linux and open-source software distributor Red Hat (RHT) are up $3.52, over 5%, at $71.97, in late trading, after the company this afternoon reported fiscal Q4 revenue and earnings per share that topped analysts’ expectations, and set a new $500 million share repurchase plan.

Revenue in the three months ended in February rose 16%, year over year, to $464 million, yielding EPS of 43 cents, excluding some costs.

Analysts had been modeling $457 million and 41 cents per share.

CEO Jim Whitehurst called the results “strong,” noting “increased cross-selling in our top 30 deals which were all over $2 million for the first time.”

Added Whitehurst, “We believe that our strategic position as a trusted provider of infrastructure and our execution this past year have positioned us for strong constant currency revenue growth in the next fiscal year.”

Shares of printer maker Lexmark International (LXK) are up $1.86, or almost 5%, at $42.65, in late trading, after the company this afternoon announced it will purchase enterprise software maker Kofax (KFX) for $11 per share, or a total enterprise value of $1 billion, using Lexmark’s overseas cash.

The price is a 47% premium to Kofax’s close of $7.50 on Nasdaq today. Hence, Kofax’s U.S.-listed shares are up $2.68, or 36%, at $10.18 in late trading. (There is a separate listing on the London Stock Exchange under the same ticker.)

Kofax, which is headquartered in Irvine, California, and which has 20,000 customers and reported $297 million in revenue in 2014, sells a variety of enterprise applications, including for document “capture,” as with a scanner; it also offers applications for mobile devices.

Lexmark defended the purchase as being in accord with its goals for capital allocation:

The acquisition of Kofax demonstrates the continued execution of Lexmark’s capital allocation framework, which is to pursue acquisitions that strengthen and support the growth of Lexmark’s solutions capabilities, while returning capital to shareholders. Since the first quarter of 2011, Lexmark has returned 78 percent of its free cash flow to shareholders in the form of dividends and share repurchases. The transaction will not impact Lexmark’s quarterly dividend.

Sterne Agee hardware analyst Alex Kurtz today issued a note to clients saying both NetApp (NTAP) and EMC (EMC) are at some risk from new storage equipment providers such as startup Pure Storage and Nimble Storage (NMBL), and from Amazon.com’s (AMNZ) Amazon Web Services.

Kurtz has a Buy rating on EMC, and also on Cisco Systems (CSCO), and a Neutral rating on NetApp stock.

Based on feedback from resellers of equipment in the U.K., writes Kurtz, it’s clear that some vendors such as Pure are aiming for EMC’s most expensive systems, the so-called “VMAX,” and that EMC is responding by pushing its newer system, “XtremeIO,” based on flash-memory drives:

Similar to our U.S.-based VAR discussions, EMC remains focused on pushing XIO in all Tier 0 and 1 environments when possible. While not all deal flow is resulting in a loss for VMAX or VNX (30-40% of Storage revenue), our conversations with these VARs highlight EMC management’s guidance of declining revenue for VMAX over the next couple of years. In the All Flash Array market, Pure Storage was the central discussion point with these VARs relative to EMC/XtremIO; it would seem for now that Pure is still targeting solutions above Nimble but at or slightly below larger VMAX and Hitachi installations (based on these resellers interactions).

The challenge from Amazon’s cloud computing is less clear, he writes:

We see two areas of focus that could help improve sentiment in the near term: (1) EMC market share has reached a record high at 33% last quarter per IDC and with ongoing issues at HP, NetApp, and IBM, EMC moving to the 34-35% range over the next year could offset some secular headwinds and (2) VMware execution on new platforms in 2H15 would address some investor concerns on rate of investments EMC management is making at the consolidated level.

Kurtz’s note follows a downgrade yesterday by Piper Jaffray‘s Andrew Nowinski of both NetApp and EMC on worries about incursions by alternative storage tech.

EMC shares today are down 33 cents, or 1.3%, at $25.92, while NetApp is off 62 cents, or 1.7%, at $36.02.

BlackBerry (BBRY) reports earnings this coming Friday, March 28th, before market open, and RBC Capital Markets‘s Mark Sue today offers his preview of what to look for, opining that it could mark a “rebuilding point” for the company and its stock.

For that tipping-point moment, Sue is projecting a really big miss: $661 million in revenue for the three months ended in February, well below consensus of $804 million, based on his expectation the company will sell 1.3 million smartphone units.

His EPS projection is for a 7-cent loss per share, worse than consensus for a 3-cent loss, as lower revenue makes it harder to absorb operating expenses of about $390 million per quarter, he opines.

Moving forward, Sue has revenue picking up each quarter, with perhaps $729.2 million in the May quarter, $730.73 million in August, $724 million in November, and $739 million in the year-out February quarter. The company may break-even by the February quarter of next year, he estimates.

The current year may not yet be the year for hardware profits, he opines, but things are looking up:

BlackBerry’s new Classic seems to be having a decent start, though will have a limited impact on F4Q, considering the handset launched halfway through the quarter. With devices now GM positive, 8M-10M units are needed to have scale for profitability. We’re expecting 7.6M BB10 units in FY16.

More important, BlackBerry is becoming more and more of a software company, and he’s looking for evidence of gains in that respect:

We’re looking for proof-points of a pathway towards its $500M software revenue target for FY16. BES 12 billings growth will be critical and so it’s about EZ Pass transition beta/legacy customers to BES 12. BlackBerry’s winning back some die-hard enterprise customers. BlackBerry’s partnering with Samsung, IBM and others to leverage its security expertise. Subscription billings growth may have to be meaningfully higher with subscription revenues recognized ratably. We’re comfortable with better QNX contributions; estimated at ~ $100M. On BBM, it’s still early to call whether BlackBerry can monetize its 90M users to generate $100M in revenues/yr, possible for a few dollars/yr. EMM market is growing so little business risk. Our survey work shows increasing BYOD penetration driven by improved productivity. EMM’s evolving beyond MDM helping stabilize and even improve ASPs. We’re feeling incrementally better about BlackBerry’s market opportunity, particularly in regulated industries. According to our checks, MobileIron and VMware/AirWatch seem to be gaining share, while Good and others are shedding share. BlackBerry has ~7-8M enterprise subs and there’s an opportunity to transition to a software subscriber base. Considering mix of perpetual/subscription, billings may need to be meaningfully higher. In CY14, AirWatch had ~$200M in annual billings, MobileIron was at $145M (+45% YoY) with Good has $221M (+14% YoY) in annual billings for CY14.

BlackBerry shares today closed up a penny at $9.52. The stock is up 3.7% in the past 12 months but down 13% so far this year.

Bernstein Research communications analyst Pierre Ferragu today offers up the work of his associate Joe Del Gaudio on the basis of networking technology relevant to investing, which he bills as part one of a “teach-in.”

Ferragu, who has an Outperform rating on shares of Cisco Systems, Juniper Networks, and F5 Networks (FFIV), among others, is mainly focused on giving a primer to investors in this installment. However, he does offer some observations as to why Cisco can thrive in certain market segments despite challenges from the likes of, for example, Arista Networks (ANET).

After explaining some of the most basic elements of the technology, which will be familiar to anyone following the market, the authors turn to the prospects for the different segments of networking.

They lead off with the following chart showing the size, growth and the concentration of competitors in the different segments of the market:

As the authors explain,

The size of the bubble represents the size of the market; it goes from about $2bn for ADCs to about $24bn for IP Routing. Within each bubble you can see a high-level breakdown in market segments. At a high-level, Data Networking appears to be a fairly mature industry, but there are still some interesting pockets of growth. First of all, growth related to the expansion of the Data Centre market, which drives 10-15% p.a. growth in ADCs and 10%+ growth in data centre switching. This growth is in our view sustainable in the medium term. Secondly, WiFi is still in deployment phase and posts growth rates still in the low teens. This growth is in our view set to slow down over the next 3-4 years as penetration matures. Thirdly, Security is growing a healthy 5% as it addresses constantly evolving breaches, leaks and data thefts. Collaboration and the overall switching and routing market are mature segments.

Among areas where Ferragu and Del Gaudio expect Cisco to maintain dominance is switching. They make veiled reference to Arista, and perhaps to startups such as Cumulus Networks, but they see Cisco re-asserting itself in the field at some point:

While new start-ups may initially lead the market in terms of performance and gain market share, eventually Cisco catches up and can win back market share thanks to its platform and go-to-market advantage. This is what happened with Extreme Networks, which in the early 2000s was the first to market with Layer 3 switching but never managed to grab more than a few points of the total market. Today, we expect similar dynamics: start-ups were able to gain share from Cisco so far by bringing to market the first fully programmable linux-based open-source high-end switching platform. Since then, however, Cisco has caught up on technology and show already initial signs of recovery.

One area where Cisco has a tougher time pushing aside challengers is security, they write. In security, innovation matters more than anything, which has allowed Fortinet (FTNT) and Palo Alto Networks (PANW) to hang onto share, albeit small share:

Network Security is an area of growth with excellent fundamentals, driven by the need for always more advanced solutions to address rapidly evolving breaches, leaks and data thefts. The complexity and sensitivity involved translate into strong pricing power and business models that support sustainable revenue growth, through regular product updates, upgrades, and subscription services. As in IP Routing, Platforms and Innovation are the two forces that determine competitive dynamics. In this case, though, the outcome is different: Platforms do ensure a defensible and profitable footprint to incumbents as users get accustomed to specific features, interfaces, and custom implementations. However, innovation is key, and it can make older platforms obsolete, while new-entrants can gain strong market shares thanks to structural architecture advantages that incumbents struggle to match. Take Fortinet and Palo Alto, for instance: they entered the market in the early 2000s, and now control 7-8% of the market, while long-time incumbent Cisco is only 4x bigger than them. On your right hand side, you can see an interesting characteristic of this industry: a handful of individuals drive innovation, and, as they move to join new companies, they contribute to the structural fragmentation of the industry.

Enterprise data management software maker Informatica (INFA), which has been the subject of buyout speculation, today received a downgrade to Neutral from Buy by Rick Sherlund of Nomura Equity Research, who said that after hitting his price target of $45, “we view potential upside from here as more event driven.”

Informatica today closed down 47 cents, or 1%, at $44.10, following a 1.6% rise on Friday after Reuters‘s Liana Baker and Greg Roumeliotis reported that private equity shops Silver Lake Partners and Hellman & Friedman are teaming up to bid for the company, perhaps paying $4.8 billion or more.

Sherlund’s upgrade of the stock last July was based on what he deemed as valuation support at around $30 for Informatica’s beaten up shares. He notes that in December the company beat expectations and “and the company gave aspirational guidance for the next several years and announced a larger and accelerated share repurchase program.”

Sherlund thinks the shares are fully valued based on what he knows at the moment about the company, though interest by a PE entity, or by strategic buyers such as Hewlett-Packard (HPQ), Oracle (ORCL) or International Business Machines (IBM) could boost the stock as high as $50:

We look at the current valuation at 23.7x our calendar 2016 EPS estimate (20.4x ex-cash) and EV/uFCF of 16.7x on our calendar 2016 estimate and view the stock as fully valued on near-term fundamentals, concluding that there may be some premium already reflected in the stock for the optionality around potential takeout or to go private. At this price, incremental buyers are more likely to be event driven investors rather than buyers on near-term fundamentals of the business. The share price could well trade higher depending on the valuation analysis of private equity (cost cutting potential and required multiples of EBITDA in an LBO model), or possibly a strategic buyer. Our merger model analysis (see Activism Arrives report) had looked at potential interested parties (HP, IBM and Oracle were ones we selected for analysis) and concluded a price of maybe $50 would make sense (from a dilution perspective) depending on the interest level, possible synergies and cost cutting potential.

Shares of storage equipment leaders EMC (EMC) and NetApp (NTAP) are lower this morning after Andrew Nowinski of Piper Jaffray cut both stocks to Neutral from Overweight, warning of rising pressure on their traditional business selling disk arrays from both upstarts like Nimble Storage (NMBL) and from public cloud computing vendors such as Amazon.com (AMZN).

Based on feedback from resellers, the wares of Nimble, Pure Storage, Nutanix and others have real appeal to bests EMC’s wares, he writes:

We continue to hear that Pure Storage and other vendors such as Nimble Storage are making inroads into the installed base of EMC. Additionally, we believe EMC is losing share in the converged infrastructure market to vendors such as Nutanix. In our Q4 VAR survey, Nutanix had the highest percentage of resellers (36%) citing above plan results, higher than both EMC’s Vblock (21%) and VSPEX (13%) platforms, as shown in Exhibit 1 below. Our discussions with channel partners indicate the next-generation vendors have solutions that are easier to scale and offer more flexibility than the legacy converged platforms from EMC. The following exhibit highlights the results from our 4Q14 survey regarding the converged infrastructure market.

Data from IDC show EMC and NetApp and International Business Machines (IBM) losing share:

IDC recently published market share results through 2014, which show the top three legacy storage vendors, including EMC, losing market share. In 2014, EMC lost 40 basis points of market share, dropping from 31.4% in 2013 to 31.0% in 2014 as shown below in Exhibit 2. Conversely, the “Other” category added 210 basis points, which includes the next-generation storage vendors like Nimble, Pure Storage and Nutanix. This data supports our belief that EMC is losing market share predominantly to the next-generation vendors.

Nowinski also cites data from IDC suggesting more and more, the growth in storage is coming from the cloud:

According to IDC’s forecast, revenue from storage within the overall Infrastructure-as-a-Service (IaaS) market is expected to increase at a 37.4% CAGR through 2018, reaching $12.1 billion. Conversely, the on-premise storage market is only expected to increase at a 2.6% CAGR during that period. We also note that while storage revenue for the public cloud market only accounts for ~19% of the on-premise storage market, this forecasts implies it will increase to 41% by 2018. The following exhibit highlights the public cloud forecast relative to the overall storage market forecast.

Nowinski’s price target on EMC goes to $27 from $30, while his NetApp target goes to $36 from $42.

EMC shares today ar down 21 cents, or 0.8%, at $26.49, while NetApp stock is off 81 cents, or 2.2%, at $36.51.

About Tech Trader Daily

Tech Trader Daily is a blog on technology investing written by Barron’s veteran Tiernan Ray. The blog provides news, analysis and original reporting on events important to investors in software, hardware, the Internet, telecommunications and related fields. Comments and tips can be sent to: techtraderdaily@barrons.com.